Why Invest Anyway?

Ray’s Take: There’s only two ways to earn money honestly. One is by working and the other is by investing so your assets work to make money for you. Unless you want to work forever or make so much money working you can’t spend it all, investing is the only way to be financially independent or achieve long-term goals like funding the kid’s college education or buying a vacation home.

Investing is not the same as saving. Money in your savings account is safe, but unlikely to grow much, particularly with currently low interest rates. Investing means taking risk through buying stocks, bonds, mutual funds or other financial products in the expectation that your purchase will increase in value over time.

While there are few guarantees that your investments will increase in value, historically investments grow over time if you make informed choices. A financial adviser can provide you with the guidance. However, if you want to develop your own plan, you can reduce risk by selecting mutual funds over individual stocks.

More importantly, resist get-rich-quick investments, which usually turn out to be anything but; and it’s probably wise to avoid following investment tips from TV’s investment “experts.” After all, they just shared that same tip with millions of other people too. And if it doesn’t work out, they’re hardly accountable to you and are sure to have another tip tomorrow.

Just remember: The sooner you start investing the longer your investments can grow. You’re investing for the long term, so don’t be swayed by market fluctuations. Finally, take full advantage of any 401(k) savings plan that your employer may offer. It’s harder to spend it if it’s pulled out of your check before you ever get it!

Dana’s Take: A lot of things are promoted as investments that don’t really fill the bill. Original art, antiques, jewelry and collectibles are just a few of the things often promoted as investments. Some of these may indeed increase in value – though the opposite is just as possible – but they are not good investment choices for several reasons.

First of all, they are not readily sold when you need the cash. There are always buyers for stock investments, but no one may be interested in purchasing that prized baseball card the day you need to sell. In addition, your primary market for the sale of any of these items is a dealer. Dealers have to buy at lower prices so they can resell at a profit. That means you probably won’t realize much of your investment’s full value.

Purchasing art, antiques, and so forth is fine for your own enjoyment, but don’t consider them a part of your nest egg. If you’re downsizing, now may be the right time to sell those items and invest the proceeds.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.